Ontario Teachers’ Pension Plan, a Canadian pension plan with CA$270 billion ($197 billion; €167 billion) in assets, plans to double its investments in climate-aligned assets to $70 billion from a current level of approximately $35 billion. The pension has given itself a time horizon of four years to do so.
The CA$70 billion target is at the centre of OTPP’s revised climate strategy, unveiled by the investor on Thursday, and will see it deploy capital into “Climate Transition Aligned (CTA) assets in private markets”, it said in a statement. This encompasses both companies or assets that are decarbonising their operations, and climate solutions companies that enable the global energy transition.
One key point from Thursday’s announcement is the shift away from emissions itensity as a primary way of measuring climate progress.
The investor’s previous goal was to reduce its emissions intensity by 50 percent by 2025, which it met ahead of schedule. The pension’s 2026-30 climate strategy “shifts toward real-world impact, prioritising and measuring investments aligned with a net-zero future rather than emissions intensity,” it said. “Decarbonisation will continue to be a core focus of asset management, even as emissions intensity is no longer a primary metric.”
OTPP will “retire its previously announced 2030 interim emissions intensity target and incorporate programmes under its prior approach within the new CTA Framework”, it said.
Other key points from the announcement include:
- OTPP will report nnually on progress against its 2030 target;
- The framework by which the pension classifies climate transition-alignment has been reviewed and endorsed by the Climate Bonds Initiative. Sean Kidney, CEO and co-founder of the not-for-profit said the framework is “an example of what leading investors globally are doing to help deliver a more impactful approach to investing in and accelerating the much-needed energy transition”;
- Climate solutions are defined as companies that “reduce or remove greenhouse gas emissions; help manage exposure to climate-related risks; or enable or scale climate solutions”, per the announcement;
- “Accelerating credible transition planning” involves working with portfolio companies in “identifying decarbonisation levers, assessing technology and capital needs, and helping companies prepare for the risks and opportunities of a changing energy system”.
The context
OTPP had alread positioned itself as a thoughtful and influential investor when it comes to climate investment. In 2022 the pension allocated C$5 billion to invest in carbon intensive assets with a clear plan for reducing their emissions.
OTPP’s revised climate strategy – with its ‘doubling down’ on climate-aligned investments – is a signal to the market that the fiduciary argument for integrating climate considerations into investment strategies remains compelling. It is a reminder that even as some nations have reoriented away from net-zero ambitions, global asset owners still recognise the risks and opportunities in the transition to a low carbon economy.
The pension said: “Ontario Teachers’ remains committed to taking an active role in supporting the global goal to achieve net-zero emissions by 2050, alongside the efforts of governments, businesses, financial institutions and civil society.”
It also illustrates how leading investors have developed their thinking, moving on from the relatively blunt instrument of emissions reduction targets to a more sophisticated approach designed to decarbonise the real economy.
Private markets strategies are front-and-centre for OTPP’s climate plans.
The investor has an enormous allocation to private markets, with 60 percent of its assets invested across private equity, private debt, infrastructure and real estate. While it is predominantly a direct investor, it also works with fund partners; it was among the early LPs in Brookfield’s Global Transition Fund and TPG’s Rise Climate Fund, for example, and actively seeks to co-invest alongside GPs.
“By focusing our efforts in private investing and active ownership where we have influence, we are positioning the Fund to remain resilient and constructively contribute to the transition through the companies in which we invest,” the pension states.
In their words
Jo Taylor, President and CEO: “Our mission is to deliver retirement security for our members, and that includes effectively addressing material long-term opportunities and risks that come with climate change and the energy transition,” said Jo Taylor, President and CEO.
Anna Murray, senior managing director and global head of sustainable investing: “Accelerating the global energy transition will require a significant role for private capital, and we are pleased to set out an ambition that can have a real-world impact through working with our companies to advance transition planning and directing capital toward attractive investments in sectors tangibly enabling the energy transition.”
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